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Vietnam Real Estate Newsletter (April 2019)

Da Nang and Binh Duong are the next city and province to publicize lists of residential projects that allow foreigners to own homes

When the 2014 Housing Law came into force on 01 July 2015, it introduced various new regulations to make foreigner home-ownership easier in Vietnam. However, the implementation of this legislation, particularly the issue concerning the promulgation of areas restricted for foreign housing ownership, has remained as an obstacle for foreign home-buyers in most regions of the country.

Foreigners are not allowed to own houses in areas zoned for national defence or public security purposes. It is the responsibility of the Provincial Departments of Construction to publicize the list of residential projects in such locations, pursuant to respective instructions from the Ministry of National Defence and the Ministry of Public Security. On this basis, foreigners were expected to be allowed for ownership of housing in all commercial housing projects, except for those in areas reserved for security purposes.

However, since 2018, cities and provinces have started to implement these regulations by promulgating relevant residential project lists. In February 2018, Quang Ninh Department of Construction was one of the first provincial departments of construction to publish its list of 21 projects that were prohibited from being foreigner-owned. Followed in March 2018, Hanoi Department of Construction released the list of 241 projects that allowed foreign ownership. A noteworthy question from this promulgation is that the capital city's department of construction took the "Positive List" approach by listing out the residential projects allowed foreign housing ownership; as compared to the "Negative List" principle in the initial legislation requiring the issuance of the list of projects in which foreigners cannot own houses.

Recently, Da Nang City and Binh Duong Province were the next centres to publicize their local lists of projects regarding the foreign housing ownership. In February 2019, Binh Duong Department of Construction took the similar approach with Hanoi construction authority by issuing its list of 21 projects that allowed foreign ownership in four key areas: Thu Dau Mot City, Thuan An, Di An and Ben Cat Towns. Since February 2019, Da Nang - one of the most mature coastal and economic hubs of Vietnam - has become available to foreign buyers. The central city’s construction department has listed 17 commercial housing projects that allow foreigners to own houses, such as FPT Danang Technological Urban Town, Blooming Tower, and Azura apartment project. The city, meanwhile, announced that three projects would not be available for foreign ownership.

The publishing of the above lists in key markets such as Danang and Binh Duong has prompted positive signals for implementation of housing policies for foreigners. However, the inconsistent interpretations by regional authorities and the lack of instruction in several other regions remain a barrier to be solved. In order to form a comprehensive and transparent scheme for foreign housing ownership in the country, both residential developers and foreign home-buyers hope that practical movements from nationwide level will be implemented in the near future.

Decision No. 355/QD-TTg dated 01 April 2019 of the Prime Minister on the incentive loan interest rates of the Vietnam Bank for Social Policies in accordance with the Government's Decree No. 100/2015/ND-CP dated October 20, 2015 on social housing development and management

On 01 April 2019, the Prime Minister issued Decision No. 355/QD-TTg, setting the preferential interest rates applicable in 2019 for the Vietnam Bank for Social Policies towards loans for social housing or construction, renovation, and repair of housing, pursuant to Decree No. 100/2015/ND-CP on social housing development and management.

Accordingly, the preferential loan interest rate implemented by the Vietnam Bank of Social Policies is set at 4.8 percent/year.

Decision No. 255/QD-TTg dated 04 March 2019 of the Prime Minister on the incentive loan interest rates of the State-assigned credit institutions in accordance with the Government's Decree No. 100/2015/ND-CP

Prior to Decision No. 355/QD-TTg, on 04 March 2018, the Prime Minister also issued Decision No. 255/QD-TTg, setting the preferential interest rates applicable in 2019 for Government-appointed credit institutions towards loans for social housing or construction, renovation, and repair of housing.

Pursuant to this regulation, the preferential loan interest rate implemented by the State-assigned credit institutions is set at 5 percent/year.

II. Market News

Overseas developers heat up market

Foreign capital flows into the Vietnamese real estate sector since the beginning of 2019 remain on pace as the second-most attractive (USD 778.2 million - 7.2 percent of the total registered capital).

The Vietnamese market is attracting a variety of international investors (mainly Japan, South Korea, China, Hong Kong, and Singapore; with the United States and Europe looking at the market) on almost all segments: housing, offices, trading centres, high-end hotels, and industrial developments.

Experts expect the local property sector will continue recording growth in almost all segments, with industrial real estate the hottest in 2019.

Hanoi’s retail property market performed well in the first quarter of this year; however, challenges remain from the development of e-commerce.

According to the quarterly report on Ha Noi property market released by JLL Vietnam, in the first quarter of this year, the occupancy rate reached nearly 90 per cent, up by 1.6 percentage points quarter-on-quarter.

Overall market rent was at about USD 28.8 per sqm per month, up by 0.02 per cent quarter-on-quarter and 1.1 per cent year-on-year. In CBD areas, average rent was recorded at USD 84.9 per sqm per month, up by 0.2 per cent from last quarter, while non-CBD area saw a moderate increase of 0.03 per at USD 27.7 per sqm per month.

Vietnam’s hospitality industry will continue to contribute greatly to the country’s rapid economic growth and create more jobs, according to Mr. Mauro Gasparotti, Director of Savills Hotels APAC.

Market occupancy for the next couple of years is expected to be affected by new supply in Da Nang, Cam Ranh, and Phu Quoc, and this may result in a slowdown in performance. That said, it is clear that in Hanoi and Ho Chi Minh City, where new supply will be relatively limited and performance is expected to hold well.

Robot butlers, mobile keys, mobile check-in / check-out and smart guestrooms are being applied more often in hotels to reduce operating costs and staff numbers. However, a “human touch” will remain a critical part of the guest experience.

Property prices along Ho Chi Minh City’s first metro line may increase as the People’s Party Committee of the city is attempting to resolve debts with contractors constructing Ben Thanh – Suoi Tien metro route to speed up project development.

Private firms have been developing properties along the metro line ever since the project first began construction in 2012, launching over 132,000 units during the last 7 years. The completion of this metro system will prompt a positive impact to the city’s real estate market. CBRE Vietnam has forecasted that land prices within a 10-minute walking distance from the stations would be 10-20% higher than other areas.

Furthermore, considering that traffic congestion has been a significant issue, early commencement of urban transportation system would improve daily commute as well as public health and environment for the city. This additional means of transport infrastructure will also allow offices and other premises to expand from the city centre to further areas, sparking new interest in markets with large land supply such as District 9.

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